One of many major challenges facing risk-bearing payer organizations in today's managed healthcare environment is to find a way to accurately measure resource use for medical procedures/treatment plan options and services independent of pricing. Such a measurement may create a relative value scale that is independent of price and that crosses inpatient, outpatient, professional office-based care and prescription drugs. This relative value scale may then, in turn, be used to compare and contrast various services and providers.
Developing a scale that is independent of price is relatively difficult. Some reasons for this difficulty include provider payments dramatically differing in price. Provider payments may often be applied at a case rate, not connected to the discrete services. Utilization patterns also vary dramatically between providers. Thus, utilization is difficult to distinguish from price and place of the actual drivers for service cost.
The Center for Medicare and Medicaid Services (CMS) has developed three sets of relative weighting systems for different aspects of medical care. The first system, “Diagnosis-Related Groups” (DRGs), are a classification of hospital case types into groups expected to have similar hospital resource use. Medicare uses this classification to pay for inpatient hospital care. The groupings are based on diagnoses, treatment plan options, age, sex, and the presence of complications or comorbidities. DRG's apply primarily to acute inpatient care.
The second weighting system is known as Outpatient Prospective Payment System (OPPS) and utilizes “Ambulatory Payment Classifications” (APC). The OPPS system deals primarily with outpatient care. The OPPS essentially transfers some financial risk for outpatient services from Medicare to hospitals and to give hospitals incentives to be more efficient. Additionally, the OPPS was designed to reduce Medicare beneficiary co-payments from 20% of Medicare billed charges to 20% of the Medicare allowable charges. Usage of the OPPS fundamentally changed Medicare's reimbursement for hospital outpatient services from a cost basis (unique to each hospital) to a standardized prospective payment, similar to the fixed payments for items on the physician fee schedule. Every outpatient service does not have its own APC. The designated APC for a service is the method Medicare uses to determine reimbursement.
The third CMS weighting system provides a standardized physician payment schedule using a “Resource-Based Relative Value Scale (RBRVS) for professional office-based care. Under the RBRVS system, payments for services are determined by the resource costs needed to provide them. The cost of providing each service is divided into three components: physician work, practice expense and professional liability insurance. Payments are calculated by multiplying the combined costs of a service by a conversion factor. The RBRVS conversion factor is a monetary amount that is determined by CMS.
The currently available CMS weighting scales each focus on particular components of medical care: DRG focuses on acute inpatient care; APC is directed to outpatient care; and RBRVS focuses on professional office-based care. The CMS scales apply the types of services covered by Medicare and, as a result, certain services such as non-acute inpatient and pharmacy services are excluded. In addition, the APC scale, e.g., groups many services that are deemed to have comparable resource utilization, whether that is actually the case or not. DRG, RBRVS and APC each use differing scales or units of measure, thus simply combining efficiency measures across each of the relative weighting scales would be inappropriate and may be misleading.
It would be desirable to have a medical care efficiency measure that includes services not covered by the CMS weighting scales. In addition, it would be desirable for such an efficiency measure to allow comparison within a particular medical condition as well as across all conditions, both within and across providers. Among other things, such a comparison may be very useful to individual patient, particularly in light of Health Savings Accounts and increasing member liability and deductibles. Such benefit plans place some of the risks and rewards of selecting a medical provider in the hands of the individual patient as a medical resource consumer.